Carlsberg Seeks to Expand Chinese Beer Market Reach

Brewer to Pay $250 Million to Tap Growing Region

By

Clemens Bomsdorf

Dec. 30, 2013 6:45 am ET

COPENHAGEN—Denmark's
Carlsberg
CABGY -0.03%
A/S, the world's fourth-largest brewer, will pay 1.56 billion yuan ($250 million) to expand its reach in the Chinese beer market as part of a wider drive to ensure growth amid stagnant conditions in its core European operation.

Carlsberg said Monday it is buying 100% of
Chongqing Beer Group
600132 0.81%
Assets Management, a holding company that owns eight breweries in three different provinces of China. Chongqing Beer Group's breweries primarily sell brands licensed from Chongqing Brewery Company Co. Ltd, majority-owned by Carlsberg, as well as the brand Tianmuhu.

The move comes as Carlsberg and its rivals are eager to bolster their presence in emerging markets at a time when growth is slowing in recession-hit Western Europe and the former growth market of Eastern Europe. Asia is particularly important to the industry's biggest players because it is the world's largest regional beer market, accounting for 35% of global consumption, and is one of the fastest-growing.

Declining revenues have put increasing pressure on Carlsberg to pursue faster growth in new markets. During the third quarter of 2013, the company's sales fell by 3%.

The Asian region is expected to account for more than 20% of Carlsberg's profit in 2015, up from only about 6% in 2006, and in its quest to capitalize on the growing appetite for beer in Asia, the Danish brewer made its initial investment in Chongqing Brewery in 2010. After increasing its holding gradually, Carlsberg owns 60% of the Chinese brewery as of earlier this month.

In February this year, Carlsberg announced it would set up a brewery in Myanmar, and more moves in Asia could be on the table after Danish regulators recently approved a change in Carlsberg's ownership structure, which frees up more cash for the brewer. The Carlsberg Foundation, the brewer's major shareholder, got permission from regulators to reduce its 30% stake in the company to less than 25%, which enables a rights issue to raise more capital.

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